A recent decision from Westchester Commercial Division Justice Linda Jamieson presents an interesting contrast to a case we discussed in an earlier post. In Prisco v. L’Aquila Realty LLC, Index No. 58654/2018, Petitioner moved to disqualify opposing counsel, who was deposed in the case and certain to be called as a witness at trial. Petitioner argued that, pursuant to Rule 3.7 of the Rules of Professional Conduct, a lawyer cannot be both an advocate and a witness, except in limited circumstances.

Justice Jamieson explained that “the court is guided, but not bound by, the standards set forth in Rule 3.7, and whether to disqualify an attorney rests in the sound discretion of the Court” (quoting Harris v. Sculco, 86 A.D.3d 481, 926 N.Y.S.2d 897 (1st Dep’t 2011). Then, because summary judgment motions had not yet been filed in the case, the Court denied the motion as “premature.” “If the parties do not make motions for summary judgment, or if the motions are unsuccessful such that a trial is necessary,” Justice Jamieson said, “petitioner may make a second motion.”

In an earlier decision in HH Marina Development LLC v. Tarrytown Boat Club, Inc., however, Justice Jamieson held that a general counsel who was deposed in the case and would be a key witness at trial “cannot be allowed to take the deposition of other key witnesses.”

The different outcomes in the two cases likely is attributable to the fact that in HH Marina, the general counsel who sought to depose other witnesses was not counsel of record. Thus, plaintiff HH Marina was not deprived of its choice of counsel and the motion was not really a motion to disqualify.

Takeaway: HH Marina was a highly unusual situation, and Justice Jamieson’s decision in Prisco likely better reflects the Court’s reluctance to interfere with the parties’ choice of counsel.

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On June 14, 2019, the New York State Bar Association hosted a breakfast at the Westchester County Courthouse with Justices Linda Jamieson and Gretchen Walsh. This was a great opportunity to hear from Westchester’s Commercial Division judges on various topics, including their expectations of attorneys who appear before them. Here are a handful of important takeaways:

Discovery Disputes:

The justices expect counsel to abide by Commercial Division Rule 14, which requires good faith negotiations to resolve discovery disputes before seeking judicial intervention.

If assistance is necessary, the judges’ approaches are a bit different. Justice Walsh does not want letters; counsel should contact chambers to schedule a call. Justice Jamieson prefers that counsel first send a letter to identify the issues; the Court will then arrange a conference call, except if the issues are complex, in which case counsel must appear in person.

The justices also advised that if a dispute arises during a deposition, the parties should contact chambers to obtain an immediate ruling while the deposition is still in progress, in order to avoid the need to reopen or continue a deposition at a later date.

Briefs:

Justice Jamieson and Justice Walsh encouraged lawyers to keep briefs “short and concise.” Both justices agreed that there is no need to recite legal standards on dispositive motions and that lawyers should avoid being repetitive. In addition, Justice Jamieson encouraged lawyers to follow her rule requiring the use of tabs to separate exhibits.

Regarding page limits, under Rule 17, opening and opposition briefs must be limited to 7,000 words (approximately 22-23 pages) and reply briefs must be limited to 4,200.

Notably, Justice Walsh will allow multiple defendants to exceed the limit if they join together in a brief.

Rule 19-a Statements of Material Facts:

As discussed in a previous post, when filing and opposing motions for summary judgment in the Westchester Commercial Division, be sure to submit Rule 19-a Statements, as they are very important to both Justice Jamieson and Justice Walsh.

Oral Argument:

Both justices generally do not hold oral argument but will make an exception to give junior attorneys an opportunity to gain experience arguing motions. As Justice Jamieson said, “we would like to see everyone given a shot.” Justice Walsh said that she is considering amending her rules to allow oral argument if an attorney with five years of experience or less will handle it. Both justices also advised that they ultimately rely on the briefs in deciding motions so, as Justice Walsh said, “oral argument will not make or break you.”

ADR:

Justice Jamieson and Justice Walsh are both strong proponents of “presumptive” alternative dispute resolution, in which parties will be referred to mediation in the early stages most lawsuits. Justice Jamieson encouraged attorneys to consider mediation before making their first appearance in the case.

Civility and Professionalism:

Gamesmanship will get you nowhere. Both justices expect counsel to be professional and treat each other with civility. In addition, Justice Jamieson does not like when attorneys talk to each other instead of addressing the Court and Justice Walsh will make attorneys appear in person if they cannot agree on adjournments.

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Commercial leases are often complicated, as the stakes are high for each party. A tenant needs the right space to operate its business and a landlord needs reliable tenants to cover its expenses and earn a profit. When tenants cease paying rent and vacate or are evicted, actions by landlords to collect unpaid rent ensue. Sometimes, those actions include claims against a tenant’s principal to enforce a personal guarantee in the lease. That was at issue in TSG Grat #7, LLC v Cortlandt Manor Flooring, LLC/John Posimato, Index No. 57204/16.

In this case before Westchester Commercial Division Justice Linda Jamieson, the tenant-defendant, Cortlandt Manor Flooring, LLC, leased commercial space from the plaintiff-landlord. After the tenant stopped paying rent, it was evicted. The landlord sued the tenant and its principal, John Posimato, to collect rent allegedly due through the end of the lease. The landlord claimed that Posimato personally guaranteed the lease. But Posimato signed the guarantee: “John Posimato, Member, Cortlandt Manor Flooring, LLC.”

In opposition to the landlord’s summary judgment motion, Posimato argued that he only signed in his corporate capacity. In reply, the landlord submitted an unsigned proposal it had sent to Posimato before the lease and guarantee were executed that sought a six-month “good guy guarantee.”

Justice Jamieson ruled that the landlord’s unsigned proposal proved nothing. Further, the lease required the landlord to reduce any damage claim by the amount it received after reletting the premises. But the landlord failed to address this in its motion papers. For these reasons, there were issues of fact concerning the amount of rent owed and whether Posimato signed the guarantee personally or in his corporate capacity. Thus, Justice Jamieson denied the landlord’s motion for summary judgment against Posimato.

In addition, the corporate tenant did not appear in the action. Justice Jamieson denied the landlord’s motion for a default judgment and dismissed the action against the tenant because the landlord only served by regular mail. Under Limited Liability Company Law § 303 and CPLR § 311-a, that “is not an authorized method of serving a limited liability company.”

Takeaway for Landlords: When seeking a personal guarantee under a commercial lease, make sure the language clearly and unambiguously provides that the representative is signing personally rather than in his/her corporate capacity.

Additional Takeaway: Make sure you hire an experienced process server who knows the proper methods of service.

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An easement, or right-of-way, grants someone the right to cross or use another’s property for a specific purpose. But if the holder of the right-of-way exceeds the scope of the easement, he or she may be liable for damages for trespass. That was the case in Julia Properties, LLC v. Levy.

In July 2009, plaintiff Julia Properties, LLC, owned by Thomas Decea, entered into a lease with William Morgan, the landlord, to rent property owned by Morgan. Defendant Norman Levy possessed a right-of-way over a portion of the property to access a dock. Plaintiff sued Levy to recover damages for trespass, claiming that in July 2010, Levy engaged in criminal conduct on the property. Specifically, Plaintiff alleged that Levy intentionally used the wheels of his truck to launch stones at the home occupied by Decea’s family.

Levy moved for summary judgment dismissing the case. He argued that he possessed a right-of-way over the relevant portion of the property and that no damages were sustained. Levy also argued that Plaintiff had no right of possession at the time of the alleged trespass and, in turn, lacked standing. Levy claimed that Plaintiff could not have leased the property before October 2010, when a certificate of occupancy for the property was issued.

On the other hand, under the lease, the “commencement date” was the date that either: (i) Landlord obtained a certificate of occupancy; or (ii) the property was deemed habitable. Decea testified that the property was ready for occupancy in 2009 and habitable by July 2010. Thus, Plaintiff argued, it had the right to possession at the time of the alleged trespass.

The Second Department held that Westchester Supreme Court Justice Linda Jamieson properly denied Levy’s motion for summary judgment dismissing Plaintiff’s claim. The elements of a trespass claim are: “the intentional entry onto the land of another without justification or permission.” Korsinsky v. Rose, 120 A.D.3d 1307, 1309-1310, 993 N.Y.S.2d 92 (2d Dep’t 2014). Based on Decea’s testimony, Levy could not establish that Plaintiff did not have a right to possession at the time of the alleged trespass.

Levy also failed to establish entitlement to dismissal of Plaintiff’s claim based on his right-of-way to enter the property. Although “[a]n action for trespass may not be maintained where the alleged trespasser has an easement over the land in question,” Mangusi v. Town of Mount Pleasant, 19 A.D.3d 656, 657, 799 N.Y.S.2d 67 (2d Dep’t 2005), this “is true only when the scope of the easement has not been exceeded.” Gates v. AT&T Corp., 100 A.D.3d 1216, 1220, 956 N.Y.S.2d 589 (3d Dep’t 2012). The Second Department affirmed Justice Jamieson’s ruling that Levy failed to eliminate all triable issues of fact as to whether his alleged criminal conduct exceeded the scope of his easement of a portion of the property to access the dock.

The Second Department also affirmed Justice Jamieson’s ruling that Levy failed to establish that Plaintiff sustained no damages. “The essence of trespass to real property is injury to the right of possession.” Id. (quotation omitted). Thus, that Plaintiff did not own the property or spend money to repair the damage to it was irrelevant. Plaintiff may recover “consequential damages such as … damages caused by discomfort and inconvenience.” Volunteer Fire Assn. of Tappan, Inc. v. County of Rockland, 101 A.D.3d 853, 856, 956 N.Y.S.2d 102 (2d Dep’t 2012).

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Sometimes in-house counsel believe they can handle a case better, or more cost-effectively, than outside counsel. And sometimes, they just miss practicing law. Still, it’s better to let outside counsel do the talking…and the questioning. It’s impossible to know what motivated in-house counsel in HH Marina Development LLC v. Tarrytown Boat Club, Inc., Index No. 63137/17, to take a deposition. But it didn’t work out well. The facts are straightforward, but unusual.

Under CPLR 3106(d), the party seeking a deposition may designate “a particular officer, director, member or employee” in the notice. Defendants noticed “HH Marina Development LLC by Joseph Cotter” – HH’s President. CPLR 3106(d), however, gives the other side an opportunity to produce someone other than the designee. All that is required is to notify the other side at least ten days before and give the identity, description or title of the witness. Instead of producing Mr. Cotter, Plaintiff designated its General Counsel, Daniel Pennessi.

Plaintiff then sought to depose one of the Defendants. When the parties and counsel showed up, Defendants learned that Pennessi himself planned to ask the questions. Not surprisingly, Defendants objected, and the parties called the Court. When Pennessi could not cite caselaw supporting his position that he was entitled to take the deposition, it was postponed.

Plaintiff then moved to enjoin Defendants from refusing to proceed with depositions conducted by Pennessi. Plaintiff argued that Pennessi should be permitted to take depositions because he had no “threshold or significant testimony to provide upon which this case will be decided.” Justice Jamieson found this “puzzling” as Plaintiff had designated Pennessi as a witness. “By selecting Mr. Pennissi over Mr. Cotter,” the Court wrote, “plaintiff has demonstrated that Mr. Pennessi does, in fact, have ‘threshold or significant testimony to provide.’”

The issue presented to the Court was a case of first impression in New York. Specifically, “whether Mr. Pennessi should be allowed to conduct depositions that will be used in the same trial in which he was also a fact witness.” The Court ruled as follows:

First, Justice Jamieson rejected Plaintiff’s argument based on Rule 3.7 of the Rules of Professional Conduct. Rule 3.7 states that “[a] lawyer shall not act as advocate before a tribunal in matter in which the lawyer is likely to be a witness on a significant issue of fact…” A deposition, Plaintiff argued, is not “a tribunal.” But Justice Jamieson concluded that it was “a distinction without a difference.” Because Pennessi would be a key witness at trial, “he cannot be allowed to take the deposition of other key witnesses.”

Second, Justice Jamieson rejected Plaintiff’s suggestion that “if a deposition transcript must be read during trial, the reader can merely omit Mr. Pennessi’s name so that the jury does not know that he was the lawyer taking the deposition.” The Court found that the proposal “does not account for every possible situation, including one in which the deposition itself becomes an issue at trial.” Justice Jamieson was “not willing to risk a mistrial so that Mr. Pennessi … can take the deposition instead of counsel of record doing so.” Thus, the Court denied the motion for a protective order and ordered that Plaintiff, by counsel other than Pennessi, take the two outstanding depositions.

Takeaway: In-house counsel cannot be a witness in the case and take a deposition, too.

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For many, purchasing real estate is a stressful endeavor. It’s further complicated when one attempts to buy distressed property through a short sale, when an owner sells property for less than the mortgage balance. Lenders typically allow short sales to recoup a portion of the loan balance quickly and avoid a lengthy and expensive foreclosure proceeding. Westchester Commercial Division Justice Linda Jamieson granted a short sale buyer a temporary restraining order (“TRO”) and a preliminary injunction when the seller attempted to cancel the contract.

In Singh v. DiBerardino, Index No. 67782/2017, Plaintiff contracted to buy Defendant’s property in Mamaroneck through a short sale. The parties signed five contracts related to it, each of which included statements that Defendant would sell the property to Plaintiff. They also signed agreements with Plaintiff’s fiancé to maintain and secure the Property and clear violations and liens. After Plaintiff undertook all of those efforts and was ready, willing and able to close, the Defendant decided to back out. Plaintiff commenced action and immediately moved for a TRO and a preliminary injunction pursuant to CPLR § 6301. Plaintiff sought to prohibit Defendant from taking actions adverse to Plaintiff’s interest in the Property and force Defendant to close on the sale.

A preliminary injunction is a drastic remedy which should be used sparingly. In exercising its discretion, the Court must determine if the movant has established: “(1) a likelihood of success on the merits, (2) irreparable harm in the absence of an injunction, and (3) a balance of the equities in favor of the injunction.” Trump on the Ocean, LLC v. Ash, 81 A.D.3d 713, 715, 916 N.Y.S.2d 177, 180 (2d Dep’t 2011). Based on the facts, Justice Jamieson found that Plaintiff met its “particularly high burden” and granted the motion in its entirety.

In opposition, Defendant claimed that she signed the contracts under duress and without benefit of counsel and that the work performed by Plaintiff was unauthorized. But Justice Jamieson rejected these arguments. Regarding the claim of duress: “it is well-settled that ‘[a] party is under an obligation to read a document before signing it, and cannot generally avoid the effect of the document on the ground that he or she did not read it or know its contents” (citing Augustine v. BankUnited FSB, 75 A.D. 596, 597, 905 N.Y.S.2d 652, 653 (2d Dep’t 2010)).

Justice Jamieson also rejected Defendant’s claim that she was not represented by counsel. Not only is this not a defense, but the evidence demonstrated that she obtained legal advice concerning the transaction. The Court further noted that Defendant signed several contracts over the course of two years. Accordingly, “it is simply implausible to believe that she did not know what she was doing, or that she was pressured into doing so on so many different occasions.” And finally, various text messages and emails indicated that Defendant did in fact authorize Plaintiff and her fiancé to perform work on the Property.

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Westchester Commercial Division Justice Linda Jamieson recently granted leave to plaintiffs to amend their complaint seven years after they filed their original complaint.

In MCC Realty III v. Retail Opportunity Investments Corp., Index No. 56448/11, Plaintiffs sought leave to drop three causes of action and add five new ones. The reason: to reflect information discovered after Plaintiffs filed the complaint, including information discovered within a few weeks of the filing of the motion. Defendants argued that they would be “severely prejudiced” by being forced to re-review more than 100,000 documents that already had been produced. Defendants also argued that Plaintiffs’ delay was unreasonable because they long had all the information needed to amend.

Despite the seven-year gap, Justice Jamieson rejected Defendants’ claim of prejudice because the proposed amendment arose out of the same facts in the original complaint. Further, Defendants’ “unsubstantiated” claim of prejudice by having to answer and defend the new claims was not enough to defeat the motion. Instead, Justice Jamieson held, a party must show that it was “hindered in the preparation of his case or has been prevented from taking some measure in support of his position” (quoting RCLA, LLC. v. 50-09 Realty, LLC, 48 A.D.3d 538 (2d Dep’t 2008)).

Justice Jamieson also suggested that the delay was not prejudicial because it was not the product of lack of diligence on the part of Plaintiffs. Since the case was filed, there were 23 motions, 43 court appearances, and dozens of conference calls with and numerous letters to the Court. “None of the parties in this case was ignoring it.”

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Ordinarily in real estate sales, the seller’s pre-closing representations do not survive the closing unless the contract expressly states that they do. The situation is different, however, when the seller has made a pre-closing representation about a then-existing fact, like whether the tenants are current in rent. That was the state of facts alleged by the plaintiff/buyer in 260 Mamaroneck Ave v. Guaraglia, Index No. 70017/17, pending before Westchester Commercial Division Justice Gretchen Walsh.

Plaintiff agreed to purchase a building in White Plains from Defendant based on Defendant’s representations that the commercial tenants were current on rent and not receiving abatements. After the deal closed, Plaintiff discovered that a commercial tenant was unable to pay the full monthly rent amount and expected a rent abatement. Plaintiff sued Defendant seeking rescission of the agreement, asserting breach of contract and fraud claims. Defendant moved to dismiss, arguing that its representations concerning the rent roll did not survive closing. Defendant also argued that Plaintiff expressly disclaimed reliance on any representations outside the contract.

Justice Walsh found that the merger doctrine (the legal bar to contractual representations surviving closing) did not require dismissal of the fraudulent concealment or misrepresentation claims. The denial was based on Plaintiff’s allegation that Defendant misrepresented a then-existing fact (the status of rent payments) to induce Plaintiff to purchase the property. Defendant also argued that the fraud claims should be dismissed as duplicative of the contract claims. Justice Walsh disagreed, as Plaintiff was not complaining about Defendant’s failure to perform under the contract, but that a fact contained in the contract was false. It was also significant, Justice Walsh found, that Plaintiff was not seeking merely contract damages, but rescission of the contract.

Plaintiff’s breach of contract claim, however, was barred by the merger doctrine because the parties did not expressly say that representations concerning rent being paid survived closing. Justice Walsh, therefore, dismissed that claim.

Additional takeaway for those practicing before Justice Walsh:

The dismissal of the buyer’s contract claim was without leave to replead, even though the buyer asked for permission to do so. Justice Walsh explained that, at the Preliminary Conference, she asked Plaintiff’s counsel if Plaintiff wished to replead before responding to Defendant’s motion to dismiss. But counsel chose to stand on the pleadings. That fact, and that the merger doctrine was an absolute bar to the contract claims, led Justice Walsh to deny leave to replead those claims.

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CPLR 3213 enables litigants to efficiently and quickly enforce instruments for the payment of money only or a previously rendered judgment. The rule is a powerful tool for resolving business disputes. But as one Westchester County litigant recently learned (the hard way), it is limited in scope.

In Newman v. Poekler, Index No. 70790/2017, the plaintiff loaned money in connection with a real estate deal. The loan documents included an “Agreement” (which, oddly, the lender did not attach to his motion), a promissory note, personal guarantees and an escrow agreement. When the borrowers defaulted, the lender moved for summary judgment in lieu of complaint under CPLR 3213. The lender argued that the guarantees were “unconditional” which, he claimed, obviated the need to examine additional evidence to establish the borrowers’ obligation. But the lender was wrong because, although the guarantees purported to be “irrevocable, absolute, continuing, unconditional, and general without any limitation,” they were not “unconditional.” Rather, they were qualified by “the sole and limited exception … that Guarantor shall not be obligated to pay Lender under this Guaranty unless and until, in accordance with paragraph 5 of the Agreement, there is an adjudication that prevents for any reason the Note and/or the Agreement from being enforced as against Borrower ….”

In analyzing the issues, Justice Jamieson cited the First Department’s decision in PDL Biopharma, Inc. v. Wohlstadter, 147 A.D.3d 494, 47 N.Y.S.3d 25 (1st Dep’t 2017). In that case, the Court held that:

  • “[t]he prototypical example of an instrument within the ambit of CPLR 3213 is of course a negotiable instrument for the payment of money – an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time”; and
  • “an unconditional guaranty qualifies as an instrument amenable to CPLR 3213 treatment,” but not if “determination of preliminary legal issues, and reference to additional documents, was necessary before the motion court could address the question of whether the relied-on guaranties continued to be enforceable and whether they had come due.”

This, Justice Jamieson found, was “precisely the same situation in this case” as the guarantees required the Court to refer to the Agreement (which the lender did not submit) to determine if “in accordance with paragraph 5 of the Agreement, there is an adjudication that prevents for any reason the Note and/or the Agreement from being enforced as against Borrower ….”

Further, the borrowers argued that there was no such “adjudication” as required and that the Agreement defined an “Adjudicated Event” as “an adjudication that prevents the settlement from being enforced as against the Company (and any owner of the Subject Real Property and any parcel therein)” – an issue not addressed in the motions. Thus, Justice Jamieson denied the lender’s motion as “the Court [could not] interpret the guaranties without recourse to the Agreement.”

Takeaway: Before filing a CPLR 3213 motion, make sure:

  • A lender’s right to repayment is truly unconditional and not dependent upon terms in other related agreements.
  • All relevant loan documents are submitted to the Court. The failure to do so is grounds for denial of the motion and will undermine the movant’s credibility with the Court.

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Most commercial contracts contain a choice of law and forum selection clause. If the contract says that disputes between the parties will only be heard in Delaware courts, the defendant can move to dismiss based on documentary evidence – the contract and the forum selection clause. Similarly, if a plaintiff files a breach of contract case in New York and the contract says that Delaware law applies (but is silent as to where the case should be heard), a New York court can hear the case and apply Delaware law to decide the issues. “Generally, courts will enforce a choice-of-law clause so long as the chosen law bears a reasonable relationship to the parties or the transaction.” Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624, 629 (2006). But the Court of Appeals explained that New York courts should not apply another state’s law if it would violate some fundamental New York public policy. This is difficult to show. The exception is generally reserved “for those foreign laws that are truly obnoxious.” Id.

So if a contract contains a forum selection and choice of law clause, can a plaintiff avoid being sent out of state by arguing that the law of that other state conflicts with New York public policy? Justice Alan Scheinkman considered that in USA-India Export-Import, Inc v. Coca-Cola Refreshments USA, Inc., Index No. 53047/2014.

In that case, Plaintiff sued on behalf of a putative class alleging that Coca-Cola violated New York’s Returnable Container Act (the “Bottle Bill”) by imposing a charge for returnable containers (the bottle deposit). Plaintiffs alleged that Coca-Cola was not permitted to pass this charge on to them and, by doing so, it violated New York law and policy. Coca-Cola moved to dismiss on the ground that its contract with Plaintiffs required them to litigate any claim related to the contract in Georgia.

The first question the Court addressed was whether New York or Georgia law governed the enforcement of the forum selection clause. Finding the question more procedural than substantive, Justice Scheinkman determined that “the Court shall apply New York law in determining the enforceability and scope of the forum selection clause.”

Applying New York law, Justice Scheinkman found that the case should be heard in Georgia courts, which were free to apply New York law. “Here, the Plaintiffs’ real issue is not so much with the forum in which they agreed to litigate their disputes with Defendant.” Instead, “it is their fear that a court sitting in Georgia will enforce the parties’ choice of law clause and find that New York’s [Bottle Bill] has no applicability to the parties’ dispute.” Justice Scheinkman found no reason to believe that Georgia courts would be indifferent to claims based on New York law. “That Georgia does not have a bottle bill does not mean that the courts in Georgia will inevitably be hostile to fair consideration of claims based on the laws of states which have such bill.”

Thus, if the contract contains both a choice of venue and choice of law provision, and the choice of venue is somewhere other than New York, a defendant can move to dismiss based on documentary evidence. In that case, the Court will not consider whether the choice of law provision – or the substantive law of the other jurisdiction – violates New York public policy. That determination will be made by the court that the parties agreed to have hear the case in.

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